Don’t Fall Victim to ‘Dirty Dozen’ Tax Scams of 2015


Did you know you are responsible for all items on your tax return – even if you are the victim of a tax scam that caused you to unknowingly miscalculate that information? Errors on your tax return could lead to significant penalties, including fines and – in some cases – criminal prosecution.

To help taxpayers avoid fraudsters, the Internal Revenue Service (IRS) compiles a list each year of the “dirty dozen” tax scams, the most prevalent illegal schemes that taxpayers should be aware of.

The following are the 12 most common illegal tax scams of 2015:

1. Phone scams – This scam, consistently one of the most popular with fraudsters, involves callers who impersonate IRS agents and demand taxpayer payment, often via a pre-paid debit card or a wire transfer.

2. Phishing – Phishing scams typically involve an unsolicited email and/or a fake website prompting victims to enter personal financial information, which is then stolen and used to file fake tax returns.

3. Identity theft – Identity theft increases around tax time. Although the IRS pursues the individuals who file fraudulent tax returns using others’ Social Security numbers, taxpayers still need to be cautious when providing identifying information.

4. Return preparer fraud – Return preparer fraud involves tax preparers committing fraud or identity theft using a victim’s personal information. Although the majority of tax professionals provide high-quality service, there are some preparers who perpetrate refund fraud, identity theft or other scams.

5. Offshore tax avoidance – Hiding income in a foreign trust account, an offshore bank account, a private annuity or an insurance plan without reporting that income to the IRS is considered tax evasion. The IRS’ Offshore Voluntary Disclosure Program helps individuals with offshore bank accounts properly document that information for their tax returns.

6. Inflated refunds – Taxpayers should be aware of scams involving tax preparers offering inflated tax refunds. Asking you to sign a blank return, promising a big refund before reviewing the taxpayer’s standing or charging fees based on the percentage of the tax refund can all be signs of a possible scam artist.

7. Impersonating a charity – Scammers will impersonate charitable organizations to attract donations from taxpayers. Before you make a donation to a charity, check the status of that organization with the IRS.

8. Hiding income with fake documents – Taxpayers who file fake Form 1099s (or other fraudulent IRS documents) to hide taxable income will land in hot water with the IRS. An honest tax preparer wouldn’t suggest falsifying documents in order to reduce a tax bill or inflate a refund.

9. Abusive tax shelters – By concealing ownership of taxable income through the use of an abusive tax structure, scammers will attempt to avoid paying their fair share in taxes. If you aren’t sure about the legality of a complex tax structure being offered to you by a return preparer, seek a second opinion.

10. Falsifying income to claim tax credits – Some scammers will convince taxpayers to over-report or invent income to cash-in on lucrative tax credits.

 11. Excessive claims for fuel tax credits – Taxpayers cashing in on fuel tax credits are generally limited to off-highway business use of a vehicle, making the credit unavailable to many taxpayers. Taxpayers who don’t qualify for the credit but attempt to claim it in order to increase a tax refund are committing tax fraud.

 12. Frivolous tax argumentsFrivolous tax arguments involve taxpayers making outrageous claims in order to avoid paying the taxes they owe the IRS. The penalty for filing a frivolous tax return is currently $5,000.

In an effort to combat fraud, this year the IRS is sending out identity verification letters to taxpayers whose returns contain indications of identity theft.  After those taxpayers identify themselves, either by phone or online, they can confirm whether or not they filed the returns in question.

The dirty dozen tax scams are some of the most common schemes that taxpayers are likely to encounter in 2015. Victims of tax scams may be held accountable by the IRS for the information they provide, which – in some cases – can include criminal penalties. Victims may also suffer financial losses. If you suspect you are a victim of a tax scam, contact the IRS to review your return information.

Louis Balbirer, MST, CPA, is a Tax Principal at Kaufman Rossin, one of the Top 100 CPA and advisory firms in the U.S.

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